The dollar dropped for a third day to its lowest level in more than two years as Joe Biden looked increasingly likely to claim the US presidency and traders geared up for a Federal Reserve policy decision.<\/p>\n
The Bloomberg Dollar Spot Index fell as much as 1 percent to the lowest since May 2018. That came as the euro rallied 1.1 percent and the yen strengthened past 104 per dollar, a resistance level dating back to 2016 that was broken briefly during virus-induced market panic in March.<\/p>\n
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“The dollar has been declining as a result of the increasing likelihood of a Biden victory,” said Sonja Marten, a currency strategist at DZ Bank AG. \u201cFor now, the dollar is trading as a safe haven and the prospect that we are going to get a clear election result sooner than some had feared is currently reflected in rising risk appetite, and hence a weaker dollar.”<\/p>\n
Investors have been bracing for such a slide from a Biden win that could pave the way for more stimulus. But the possibility of a large fiscal package has dimmed under prospects of a divided Congress, with Republicans keeping control of the Senate. Such an outcome could push the Fed, which announces its decision later Thursday, to take a more dovish turn.<\/p>\n
Fed Chair Jerome Powell \u201cwill probably continue to reinforce the idea that the Fed is ready to add stimulus if needed, said Alvise Marino, a foreign exchange strategist at Credit Suisse Group AG. \u201cBut any added commentary here would expose him to risks of being viewed as politicized. And monetary policy is already in a tricky place.<\/p>\n
A lack of robust fiscal stimulus would more than likely lead to an expansion scope of the current Fed policy as opposed to adding new monetary instruments, Marino said.<\/p>\n
The weaker greenback could see dollar-yen drop to the 102 or 103 level by year-end, and below 100 in the later part of 2021, according to JPMorgan Chase & Co. strategist Tohru Sasaki.<\/p>\n
The Fed\u2019s monetary policy will drive the dollar lower, while the yen tends to appreciate during Democratic presidencies, Sasaki said. A drop in trade tension with China under a Biden administration may also reduce demand for the dollar as a haven, he said.<\/p>","protected":false},"excerpt":{"rendered":"
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